Can we get the government to pay for everything?

Rick Wilson

How much do you need for everything?

I was at an interesting forum recently on the role of innovation in solving the problems Australia faces with its generally well regarded health system. One bright young parliamentarian provided a clear focus for us all. He argued that at the present time local, state and federal governments combined are increasing spending at the rate of 4% p.a. while revenue is increasing at 3%, give or take.

If you know anything about compound interest, it doesn’t take long to figure that under that spending model you drift out to sea progressively faster the further the tide goes out.

The two biggest expenditure items in Australian government budgets are social services and health. However, according to a recent program on our healthcare system, Four Corners (ABC TV) pointed to massive savings that could be made by running a far more critical eye over the levels of waste that have been allowed to amass in the system over the last 30-40 years. The program suggested a figure of the order of 30% savings; but whether it is 20%, 30% or 40%, we are talking massive numbers.

Saving is not a dirty word.

Savings from waste can be made without damaging patient welfare because they are harvested from unwarranted, ineffective or superfluous services and treatments. Of course not all would agree and so a comprehensive and critical review the system is necessary. That review must be conducted by an independent panel with “no skin in the game” where cui bono past present or future is the primary consideration. The same approach should apply to reviews of all government services.

Here we are only talking healthcare and just one component i.e. the waste identified in medical and hospital services. It does not include a review of waste or potential savings which could be achieved by tightening up the highly valued but massively expensive Pharmaceutical Benefits Scheme (PBS) by way of a comprehensive review of drug reliability and efficacy, safety and affordability.

Over the past decade the cost of the PBS has increased by a massive 80 per cent.                                      Long-term PBS expenditure is expected to continue to grow by 4-5 per cent per annum. In 2014 the PBS cost the federal government more than $9 billion dollars which is one reason that Trade Minister Robb would have been a great pains in TPP negotiations to ensure that international pharmaceuticals companies would not be able to extract any more than they currently do under this controversial multilateral treaty.

The PBS is part of the Australian Government’s broader National Medicines Policy. Its aim is to meet medication and related service needs, so that both optimal health outcomes and economic objectives are achieved and here is where there may be additional room to move if the Four Corners findings on medical procedures are anything to go by.

Under the PBS, the government subsidises the cost of medicine for most medical conditions. Most of the listed medicines are dispensed by pharmacists, and used by patients at home.

Putting the brakes on potential rent seeking among pharmaceutical suppliers might also seriously curtail costs with little or no impact on outcomes. After all, when your only customer is the government and the payoff could be $Billions, then you can afford to pull out all stops and spend most of your promotional dollar convincing the registration body and regulator that what you are selling is what people need and as safe as spring water.

However, this looks like it is out of hand. Pharmaceutical companies have received fines of around $40Billion over the last ten years  for pulling everything from dirty tricks to research falsification, to bribing medical professionals and government officials as well as straight out fraud. And that doesn’t even include the $Millions and $Millions legally given to politicians around the world to assist in their re-election, or catastrophes and near catastrophes due to negligence or oversight to be kind.

This state of affairs is hardly a recommendation for self-regulation and definitely grounds for serious scrutiny of submissions reliant upon in-house or sponsored research supporting them. Both the current editor of The Lancet[1]  and former editors of the British Medical Journal (BMJ)[2] and the New England Journal of Medicine[3]  warn us that it is no longer possible to believe much of the clinical research published due to its being tainted by financially interested parties. In fact all aspects of the pharmaceutical registration process need to be reviewed root and branch by uncompromised arms-length officials with no ties to any of the submissions.

Compliance word cloud

The public appears more sceptical about the way Big Pharma operates and its influence over the medical profession than are perhaps the political classes according to our research. But the stakes are extraordinarily high and may justify wearing fines of the magnitude reported herein for registration of pharmaceutical remedies of all classes. Ultimately, without adequate policing the public pays twice as credulous lawmakers slip further and further into the red.

So if waste is to be removed from all areas of government support, it has the opportunity to take out the green pen and really investigate the level of savings across the board by eliminating unproductive government spending; all for the cost of an independent audit or two.

Regardless of the level of hysteria created by the masters of spin and their media suppliers, the precautionary principle is best applied when it comes to registration of any big ticket pharmaceuticals and cui bono rigidly tested if only to avoid some of the disasters wrought on an unsuspecting public in the immediate and mid-past as a result of system failure e.g. Vioxx, Paxil, Wellbrutin, Actos, Thalidomide to name just a few.

Fines can be viewed temptingly as little more than the cost of doing business unless the system is tightened up. Once on the “PBS”, there is only the motivation to keep a drug or treatment there as long as possible regardless of its relevance or efficacy.

The masters of spin are if nothing else shrewd psychologists; after all the father of their craft was the nephew of Sigmund Freud.

The more the issue of spending without necessary oversight can be tied to the overall concept of fairness and detached from issues such as poor management, inefficiency and waste, the more money that can be extracted from government and subsequently the more profits that can be made by suppliers.

So if the message can be dumbed down to “more spending good - less spending bad” without any regard to the quality or effectiveness of the spend, all those who stand to gain will snooker the government forcing them into a position which is politically too hard to extract themselves from so they relent, defer the problem for some future regime to fix and pay up.

So here’s an idea….

How about we address what makes some organisations more cost efficient than their competitors while still delivering a quality product or service …and bottle it!

And maybe those savings could be spent on fostering innovation and discovery in all of the areas Australians seem to be very good at. Some are in 21st century industries such as medical science, space technologies, new materials and digital communications and others are longer standing such as health systems, education, mining, agriculture, tourism and entertainment. But that’s just the tip of the iceberg. Our skills and services will become some of our largest exports within the next five to ten years.

 It is my hope that this newly energised Australian government, in which many have placed their faith, can explain this great future to not only a public who has to foot the massive health and welfare bill, but also to the media whose role it is to reinforce the 21st century direction.

[1] Richard Horton “Offline: What is medicine’s 5sigma?”, Vol385, April 11, 2015

[2] Richard Smith:

[3] Dr. Marcia Angell, “The Truth About Drug Companies: How They Deceive Us and What to Do About It”, Random House, NY, 2004




















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  1. […] This must include an examination of waste and poor decision-making allowed to accumulate over the last 30-40 years where billions of savings reside as noted in this paper here. […]

  2. […] This must include an examination of waste and poor decision-making allowed to accumulate over the last 30-40 years where billions of savings reside as noted in this paper here. […]

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